9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (4) TMI 848 - AT - Income TaxDeduction u/s 80IB - Manufacturing activity - claim denied as assessee company is only providing services to mineral oil concerns and generation of logs does not amount to manufacture or production of article or thing - HELD THAT - Following the decision rendered by the Hon ble High Court in assessee s own case 2011 (5) TMI 322 - DELHI HIGH COURT we are of the considered view that assessee company is an industrial undertaking engaged in the business of manufacturing or production of an article or thing for the purpose of section 32A and section 80IB. So, AO as well as CIT (A) have erred in AYs 2004-05, 2007-08 2008-09 in denying the deduction claimed by the assessee company u/s 80IB of the Act on the ground that the assessee company is not a manufacturing concern. Depreciation on plant machinery owned and used below the ground in field operation in mineral oil concern - @ 25% as against 80% claimed by the assessee - HELD THAT - As held in assessee s own case 2011 (5) TMI 322 - DELHI HIGH COURT assessee s wireline logging and perforation equipments are eligible for a higher depreciation @ 100% under cl. (ii) of s. 32(1) of the Act, r/w item III(3)(ix)(b) of the schedule of rates of depreciation in Appendix I to the Income Tax Rules, 1962. Disallowance u/s 14A - addition @ 15% of the exempted income earned by the assessee company during the year under assessment being the reasonable expenditure incurred to earn dividend income by the assessee company - HELD THAT - As assessee has stated to have already disallowed expenditure directly related to earning exempt dividend income - when investment is made by the assessee company time and manpower need to be utilized to steer the investment in right places so we reasonably restrict the disallowance made by the AO and CIT (A) from 15% to 5% of the gross exempt dividend income earned by the assessee during the year under assessment. Service-tax payable - AO held the service-tax payable as a trading receipt on the ground that the assessee has raised sales bills and charged service-tax on the same and service-tax is in the nature of revenue receipt - HELD THAT - When undisputedly aforesaid amount as service-tax payable has not been passed through P L account duly reported in tax audit report nor the assessee has claimed deduction of service-tax payable to the Government, there is no question of disallowance of the deductions not claimed by the assessee. As decided in NOBLE AND HEWITT (I) P. LTD. 2007 (9) TMI 238 - DELHI HIGH COURT since the assessee did not debit the amount to the profit and loss account as an expenditure nor claim any deduction in respect of the amount and considering that the assessee was following that mercantile system of accounting, the question of disallowing the deduction not claimed would not arise - CIT (A) has rightly deleted the addition Revision u/s 263 - Claim of additional depreciation - HELD THAT - When the assessee company has been held to be engaged in the manufacture or production of an article or thing by the order passed by the Hon ble Delhi High Court affirmed by Hon ble Supreme Court, the assessee is entitled for additional depreciation u/s 32(1)(iia) of the Act and as such, the AO has rightly allowed the additional depreciation to the assessee, hence assessment orders passed by the AO are not erroneous sufficient to exercise revisionary jurisdiction u/s 263 of the Act. Revenue supported the order passed by the ld. CIT on the only ground that the assessee is not engaged in the manufacture of any article or thing, but this issue is no longer res integra as assessee in its own case held to be engaged in manufacture or production of an article or thing. Moreover, since the ld. CIT only modified the assessment directing the AO to withdraw the deduction for additional depreciation allowed u/s 32(1)(iia) but has not set aside the assessment to be framed afresh, Explanation 2 to section 263 of the Act relied upon by the ld. DR for the Revenue is not attracted. So, we are of the considered view that arguments addressed by the ld. DR and his reliance on umpteen number of judgments is not applicable to the facts and circumstances of the case. Consequently, impugned orders passed by the ld. CIT u/s 263 not sustainable in the eyes of law, hence ordered to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Deduction under Section 80-IB of the Income Tax Act. 2. Depreciation allowance on plant and machinery used below the ground. 3. Disallowance of expenditure under Section 14A. 4. Treatment of service tax as trading receipts. 5. Jurisdiction and validity of orders under Section 263 of the Income Tax Act. 6. Additional grounds for deduction under Section 80-IB for Duliajan unit. 7. Condonation of delay in filing appeals. Detailed Analysis: 1. Deduction under Section 80-IB of the Income Tax Act: The primary issue was whether the assessee, engaged in wireline logging and perforation activities, qualifies as an industrial undertaking engaged in the manufacture or production of articles or things, thereby eligible for deduction under Section 80-IB. The Tribunal relied on the Delhi High Court's decision in the assessee's own case, confirming that the assessee's activities constitute "manufacture or production of an article or thing." Consequently, the Tribunal allowed the deduction claims for the assessment years (AY) 2004-05, 2007-08, and 2008-09, reversing the lower authorities' decisions. 2. Depreciation Allowance on Plant and Machinery Used Below the Ground: The assessee claimed depreciation at 80% on plant and machinery used below the ground, which was disallowed by the AO, allowing only 25%. The Tribunal, following the Delhi High Court's decision, held that the assessee's wireline logging and perforation equipment qualify for higher depreciation at 100% under the relevant provisions of the Income Tax Rules. Consequently, the Tribunal directed the AO to allow the higher depreciation rate. 3. Disallowance of Expenditure under Section 14A: The AO made disallowances under Section 14A for expenditure incurred to earn exempt income. The Tribunal noted that Rule 8D was not applicable for the AY 2004-05 and that disallowance should be based on reasonableness. The Tribunal reduced the disallowance from 15% to 5% of the gross exempt dividend income for AY 2004-05 and similarly adjusted the disallowance for AY 2005-06. 4. Treatment of Service Tax as Trading Receipts: The AO treated the unpaid service tax as trading receipts. The Tribunal, following the Delhi High Court's decision in CIT vs. Noble and Hewitt (I) P. Ltd., held that since the service tax was not passed through the profit and loss account and no deduction was claimed, it should not be treated as trading receipts. Thus, the Tribunal upheld the deletion of the addition made by the AO. 5. Jurisdiction and Validity of Orders under Section 263: The CIT invoked Section 263, treating the AO's orders as erroneous and prejudicial to the Revenue. The Tribunal observed that the AO's orders were based on established judicial precedents, including the Delhi High Court's decision in the assessee's own case. Therefore, the Tribunal held that the AO's orders were neither erroneous nor prejudicial to the Revenue's interest and quashed the CIT's orders under Section 263 for AYs 2006-07 and 2007-08. 6. Additional Grounds for Deduction under Section 80-IB for Duliajan Unit: The assessee sought to raise additional grounds for claiming 100% deduction under Section 80-IB for the Duliajan unit, citing a notification and the second proviso to sub-section (4) of Section 80-IB. The Tribunal allowed the additional grounds, emphasizing the need to assess the correct tax liability and remitted the issue back to the AO for verification and fresh adjudication. 7. Condonation of Delay in Filing Appeals: The Tribunal condoned the delay in filing appeals for AYs 2006-07 and 2007-08, attributing the delay to the assessee's previous consultant's failure to inform about the orders. The Tribunal adopted a liberal approach to ensure substantial justice and allowed the appeals to be heard on merits. Conclusion: The Tribunal's order addressed multiple issues, primarily revolving around the eligibility for deductions under Section 80-IB, the rate of depreciation on specific equipment, and the validity of orders under Section 263. The Tribunal largely ruled in favor of the assessee, allowing the claims for deductions and higher depreciation rates, while also remitting certain issues back to the AO for fresh consideration. The Tribunal emphasized the need for a correct assessment of tax liability, adhering to judicial precedents and ensuring substantial justice.
|
